Changes to the tax system for land development which are likely to have a major financial impact on landowners and developers are expected any day now.

They relate to the increase in value that land gains when permission is granted for new development, for example for housing, and the extra investment needed to build necessary road improvements, a new school and so on to support the development.

Previously, this has been worked out locally between developers or land owners and local authorities, and is known as planning gain.

The general opinion is that the system works well, with liabilities determined and spent locally and the view, certainly in this part of the region, is "if it ain't broke, don't fix it".

The new system, known as planning gain supplement (PGS), is likely to see developers or the owners of land having to pay a proportion of the uplift in its value once developed directly to the government.

Since the Second World War, successive governments have looked at the issue. Most came to the conclusion that it was too complex to administer. The present government seems to be determined to press ahead. It has already been through two rounds of consultation, so it is now a matter of when it will happen, not if.

We do not yet know what the rate of tax will be or how it will be worked out, but potentially it could have far-reaching, significant consequences with, in theory, large sums of money being owned to the Revenue.

The fear for those behind present developments is that the new system will have begun by the time they move on to site and they could be hit with bills later that they were not anticipating.

It is important that landowners and developers seek professional advice early so they can be informed as soon as the new system is announced and can make decisions accordingly.

The government says communities will still benefit from the new system with "most of" the money being ploughed back into improvements in local areas. It says it will support the need for improvements to our major public infrastructures by providing necessary investment. Sceptics fear that not enough of the tax will be retained locally.

The motivation seems to be to alleviate, in particular, the desperate problems in the South-East, but the system will nevertheless be applied nationally.

It is hoped, therefore, that it may also help to solve our regional road problems. However, at the moment, strategic highway improvements are excluded from the list of potential developments that PGS can be put towards.

* Steve Barker is a planning consultant in the town and country planning team at Blackett Hart & Pratt. For more information, contact him on (01325) 466794.

Published: 09/05/2006